Verifying Violations of Non-Compete Agreements

Employees who sign employment agreements that include a “non-compete” provision are generally prohibited from working in jobs or businesses that would provide services or products that compete with the current employer. However, employees will often “jump ship” for a competitor who offers a better compensation package, especially in tight job markets. The legal aspect of prosecuting a non-compete claim is the arena of an attorney. For investigators, the task is to document the alleged violation.

Three common methods of documenting a non-compete violation are:

Surveillance

Interviews

Pretextual calls or meetings

Surveillance: One way of establishing a potential violation is to follow the former employee to his current place of employment. However, depending on the circumstances, that may not be sufficient to prove the violation.

For instance, suppose the employee drives to a large office building and is observed entering a brokerage firm. Her prior employment contract prohibits her from engaging in stock or bond transactions for clients of her former employer, another brokerage, for six months. However, simply proving that the subject entered the office does not constitute proof of a violation. Determining the employee’s new job duties would require additional investigation to verify a possible violation.

If the former employer is willing or allowed to disclose client information to third parties, the investigator could conduct discreet interviews with certain clients who the employer suspects might have given their business to the former employee and his or her new employer. Investigators must be very cautious in conducting these interviews to avoid offending the client or intimating that anything is seriously amiss. Sometimes a “quality control audit” can be used as a way to determine if the client is satisfied with the current level of service offered by the employer, i.e., whether or not the client has followed the employee to a new employer. Questions along this line will usually uncover indicators of any new relationships.

Pretextual calls or meetings: Conducting pretextual calls to the former employee can provide information, but they rarely go as well as the attorney or employer hope. Usually, the attorney and employer will provide a script for the investigator to follow, with key questions to ask to solicit the desired information. The problem, of course, is that the former employee doesn’t have a copy of the script! He doesn’t know his lines and won’t necessarily cooperate with the investigator in providing evidence of an alleged violation.

Of these three methods, interviews are the most simple and cost-effective. A client may be willing to provide an interview or an affidavit concerning the employee’s attempts to move the client’s account or business. Business neighbors or landlords may confirm that the employee is working at a specific developed location and may even have been approached as prospects by the subject. The investigator might even be able to obtain business cards with the employee’s title during a field visit (see “Case Studies”).

Surveillance is time- and cost-intensive, but an experienced investigator can document the subject’s daily activities on video, establishing where the subject is employed and who he meets when he leaves the office. While the cost is significant, there may be no other means of establishing the subject’s employment or activities that violate the agreement.

Pretext calls and meetings are challenging, but can be very effective in certain cases. While covert filming is not illegal, covertly recording conversations is not permissible in every state. Therefore, admissions by the employee made during a telephone call may not be recorded, and the attorney will have to rely on the investigator’s notes and testimony. If the subject is employed in a state that does permit “one-party” recording (or that does not require the other party’s consent), an investigator in that state should be retained so that there is no question about the legality of the recording should the matter be litigated in court.

When you suspect that a former (or current) employee may be violating his or her non-compete agreement, call the legal investigators at Complete Legal Investigations, Inc. to discuss your options. We can help you craft a strategy that accomplishes your goal and controls your costs. Call us at 561-687-8381, or visit our website at www.completelegalinv.com.